A jargon free guide to investing for freelancers and self-employed creative workers
You’re given three wishes. What’s the first thing your inner wise-ass asks for? That’s right: more wishes. When it comes to finances there is an option that comes pretty close to this scenario – it’s called investing…
I’ve said it before and I’ll say it again: no one gets into creative work for the money. There are benefits in creative work that far outweigh the relative dent in your paycheque. It’s an exchange the majority of us are happy to make. But with less cash available to us across our careers, we need to be smarter with what we have. This is where investing can help us.
Disclaimer: This article is for financial information and education purposes only. It is not financial advice. Investing carries risks. The value of your investments and can go down as well as up and you may not get back the original amount invested. Always do your own research and seek independent advice where required. Read the full disclaimer here.
What is investing?
The term ‘investing’ conjures up all sorts of negative connotations of city boys, YouTube shysters and sheep-stealing aristocrats. But let’s try to ignore those preconceptions for the moment, because investing is far too powerful a tool to leave in the hands of such characters.
“Investing is about short-term sacrifice for longterm gain – this is something we are good at in the creative industries.”
Probably using it to buy things that produce more income. This is the process of investing and those ‘things’ are called assets. They come in many forms – for instance, stocks, bonds or rental property – but you can think of them as things that ultimately put money into your pocket.
Let’s borrow from another fairy story – the golden goose. That sparkly water fowl is an asset. To raise a golden goose you would need to buy the goose, invest in some feed, maybe build a pond and some form of shelter, but the golden egg it popped out every day would make it worth the initial sacrifice.
Don’t dismiss investing as a boring thing for boring people
Think of it this way: buying assets is how you make money work for you, instead of the other way around – and that is a considerably more exciting concept.
Each good asset you buy will generate a little bit more income. If you’re on a low or variable income from your work, investing could one day make a real difference to your cashflow.
“Keep it simple, invest in things you understand and make it a habit that you keep over the longterm”
As you acquire assets, you can choose to spend that increased income, or reinvest it to buy more assets.
The latter habit is how the “rich get richer”, why “money goes to money” and why the pandemic – with its stock market crash (resulting in cheaper assets) and subsequent recovery – has created more billionaires than ever before.
Contrary to popular belief, though, you don’t have to be wealthy to invest. Anyone who can create a bit of disposable income can choose to funnel some into investments.
Keep it up and, eventually, you may be in a situation where you have built up enough income-generating assets to make a huge difference: to your lifestyle, your travel plans or even backing creative ventures of your own.
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Thinking longterm is something creative workers know how to do
To invest, you need to make a choice to put that money into something for the longterm (in the stock market, this is usually 10 years+) instead of spending it.
“Many in creative roles have better things to do than watch the markets all day and cursing that Tesla dipped while they were in the loo.”
Any actor who spent years waiting tables so they could make auditions knows about investment. Anyone who did the internship and landed freelance work; who spent time at the funding workshops and received an Arts Council grant; who saved their gig money and bought recording gear… I’ll stop listing cliches now, but hopefully you get the picture.
We might feel repelled by some of the imagery around investment, but most creative types have already adopted this core concept.
Why you need to figure out investing now, not someday
Here’s a well-known example (I’m not the first to use this)…
Two 20 year-old twins – Early Ellie and Late Larry – start jobs with identical incomes.
Early Ellie decides to immediately invest £100 a month. She pays in for 10 years, until she’s 30, and then stops – making a total contribution of £12,000. She then leaves it invested until she is 60.
Late Larry waits until he is 30 to start investing, but then diligently pays in £100 a month until he is 60. A total contribution of £36,000.
Both get the same annual return of 7% on their money and opt to reinvest any returns it generates across that time.
Question: Who do you think ends up with more by the time they’re 60? Ellie who invested £12,000 or Larry who invested £36,000?
Newly self-employed? Self-assessment can seem confusing. Let’s try to simplify things…
Whether you’re a tour manager or vocalist, designer or dancer, it often seems that the one thing all new creative freelancers have in common is a sense of confusion around tax and self assessment.
When you first approach it, self-assessment can be frustrating, confusing and worrying. I always think this scene from Black Books nicely captures the unique anguish of the clash between your lovely, creative brain and your tax return.
It’s not surprising then that tax and, in particular self assessment, frequently pops up among the top concerns of new freelancers.
So what can we do to alleviate some of that panic and actually get some clarity on the self assessment process? Aside from experience, it comes down to three things…
Knowing where to get your information. In the UK, this will be the gov.uk site. The content in this piece is based on that information and I’ve included direct links to all the source pages.
Staying organised. Regularly organising and storing your receipts, invoices and relevant bills/statements is essential. It will help you to quickly and accurately complete your return, evidence your claims should you be audited and give you more time to anticipate and deal with any surprises arising from the self-assessment process. Keep it simple and frequent.
Seeking advice from a qualified professional: namely a tax advisor or accountant. An accountant can cost around £200 a year (more in London) for a basic self-employed client and may well save you this in tax and admin each year alone. At that price, you will likely still need to track your own income and expenses, but they will complete the return and answer any questions you have. Many also find the peace of mind to be well worth the fee.
Below I outline some of the key things you’ll need to know to get going as a new self-employed creative worker. This is about getting clarity – it is not an exhaustive list, it’s just meant to help you get up and running.
However, before we go any further, because I am NOT a qualified professional such as an accountant or tax advisor, I have to offer the following disclaimer, please read it.
DISCLAIMER: The information below and on CreativeMoney.co.uk is provided for financial guidance and education purposes only and is not intended to address your particular personal requirements. It is not tax advice, financial advice or recommendation and should not be considered as such.
Matt Parker is NOT a financial advisor, accountant or tax advisor and Matt/Creative Money is not regulated by the Financial Conduct Authority (FCA). This means he is not authorised to offer financial or tax advice.
Always do your own research and seek professional advice from an accountant or tax advisor before acting on any of the information provided here.
The content in this guide is based on information sourced from gov.uk and was accurate at the time of writing. Creative Money and Matt Parker cannot be held responsible for subsequent changes to the law or tax system.
This is the official site of the UK government/HMRC. Be wary of all other platforms – even this one – as they may not always relate to the UK laws, carry the correct qualifications, or be kept up-to-date.
Do I need to register as self-employed?
When you are self-employed/freelance (unless you setup as a company or partnership) you are a ‘sole trader’ in the eyes of the taxman. Here’s Gov.uk’s criteria for being self-employed.
Anyone who earns over £1,000 in a single tax year from self-employed work (even students) needs to register as self-employed and complete a self assessment tax return. Head to Gov.uk to register as self-employed.
Once registered, you can complete the self assessment process online and the site calculates the amount owed based on your profits.
How does it work?
To calculate our profits (and later our tax) we need to know how much our business as a sole-trader has earned and how much it has spent:
Your business income – your business expenses = your profit.
You are responsible for tracking and evidencing your own income and expenses. Once a year you will then enter these figures to calculate your income tax, student loan and national insurance payment, via the self-assessment website.
Personal Allowance for self employed workers
Everyone gets a tax free Personal Allowance, which is the amount you can earn in income (or self-employment profits) before you have to pay income tax. As I write this, in May 2021, the standard Personal Allowance is £12,570.
National insurance for self employed workers
National insurance payments are collected in addition to income tax and are essentially another form of taxation.
You will be liable to pay tax and class 4 national insurance on profits above £9,569 at 9% and above £6,515 you pay Class 2 national insurance at £3.05 a week – payable annually with the rest of your bill.
Student loans and self assessment
As with the Personal Allowance, self-employed workers share the same threshold for student loans as regular employees. As of April 2021, that will be £27,295 for new graduates.
However, whereas regular employees have an automated deduction from their pay cheque, the self employed make the repayment in an annual lump sum based on their profits, which (as mentioned above) is rolled into your income tax and national insurance payment.
For instance, a new graduate who has started doing self-employed work after 6 April 2021 would complete their tax return following the end of the year tax year in April 2022. They will then have until the deadline of 31 January, 2023 to complete the return and make their payment. They would also need to hold the records until at least 31 January 2028.
OK, now let’s get on with being self-employed…
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Make sure your invoice includes the following information:
a unique identification number
your company name, address and contact information
the company name and address of the customer you’re invoicing
a clear description of what you’re charging for
the date the goods or service were provided (supply date)
the date of the invoice
the amount(s) being charged
VAT amount (if applicable)
the total amount owed
You can track the key information from your invoices (dates, invoice number, clients, jobs, amounts) on an income spreadsheet for the year. This will help you to keep on top of payments you have received and give you a running tally on your income.
Use a separate bank account for your business
Setting up a separate bank account for payments and business expenses will help simplify your record keeping process and make it easy to review business transactions.
As a sole trader, it does not have to be a business account, a separate current account will do. Should you ever form a partnership or limited company then it needs to be a business account in the business name.
Expenses
You can deduct some of the costs of running your business provided they are allowable expenses.
Allowable expenses typically include the following…
office costs, for example stationery or phone bills
travel costs, for example fuel, parking, train or bus fares
clothing expenses, for example safety gear or stage wear
staff costs, for example salaries or subcontractor costs
things you buy to sell on, for example stock or raw materials
financial costs, for example insurance or bank charges
costs of your business premises, for example heating, lighting, business rates
advertising or marketing, for example website costs
training courses related to your business, for example refresher courses
Keep records and evidence of all your business expenses and income – this might include bank statements, receipts and invoices. They need to be well-organised and accessible. This is important should you be audited, but it also makes filling in your return much easier.
You can periodically log your expenses on a spreadsheet or use an accounting app to scan/record them. If you use a digital method to store receipts, make sure you scan both sides.
Joint business and personal expenses
If you use something for both business and personal reasons, you can only claim allowable expenses for the business portion of your usage.
To calculate this you need to make a reasonable estimate of your business usage. For instance, if you know 50% of your phone usage is business related, you can claim half of your phone expenses for the year. The key word here is reasonable, so when in doubt, err on the side of caution
There are lots of areas this joint usage might apply to, but in order to make things easier HMRC provides some ‘simplified expenses’ calculations for key situations. These are flat rates you can use to calculate the costs of working from home, living in your business premises and ownership/use of vehicles. You can choose to use these instead of your actual expenses (though you will still need to retain records of your actual usage).
Using your vehicle for work
If you use your vehicle for work purposes, you can claim a flat rate for work trips of 45p per mile for the first 10,000 miles and 25p per mile thereafter. Across a whole year this could really add up, so remember to track your mileage, particularly if you’re a touring artist.
While, we’re on the topic of vehicles: remember you will need to add business use to your car insurance if you use it for work. Otherwise, you may not be covered for any accidents that happen while travelling for work.
The art of saving when you don’t know how much you’ll need
A tax bill can represent a significant amount of money, so it’s a good idea to ‘save as you go’. One way to do this is by deducting a percentage of each payment made to you to set aside for your tax bill.
A loose rule of thumb is to save 25% of everything you are paid for self-employed work. However, those anticipating payments on account, may want to aim for more like 40%.
You may also find it helpful to store those savings in a separate bank account for each tax year, as it can help you avoid the temptation to dip into them.
Once you are registered you can login to the self assessment portal and complete your tax return from the end of your tax year (5 April for most). Your tax return (and subsequent first payment) will be due by 31 January in the following year.
You’ll need to enter some information about yourself and your business, then enter the figures as prompted for various forms of income and expenses. It will then produce your calculation for your tax, national insurance and student loan payments based on this information.
It all comes out as one total figure. This is how much you will need to budget to pay by the 31 January (and, if necessary, 31 July) deadlines.
Don’t forget payments on account
If your tax bill is more than £1,000 you will likely need to make payments on account. These often surprise people who are new to self assessment.
This is a downpayment on your next tax bill that equates to 50% of your current tax calculation. Payments on account are split equally across two instalments. One is due 31 January alongside the rest of your tax bill, the other by 31 July.
Effectively, once you hit the threshold you will need to pay 150% of your tax bill across the January and July deadlines associated with that tax year – the current calculation amount and the additional 50% downpayment on next year’s bill.
The following year you will pay the remaining balance (i.e. the difference between your actual tax bill for that year and the payment on account you have previously made) and your next payment on account instalment. This then feeds into the following year’s bill and so on…
If you have an issue, the absolute worst decision is to ignore it – there can be serious penalties for not paying your tax. There’s almost always a better outcome to found by taking any problems directly to your accountant or HMRC.
Here’s the HMRC Self Assessment advice line: 0300 200 3310.
HMRC are even on YouTube. They post using the (very catchy) handle HMRCgovUK. See…
How to pay your self assessment tax bill
Finally, when you have completed your calculation and have enough money set aside, you have to pay your bill!
Fortunately, HMRC make this step nice and easy. There are options for bank transfer, direct debit, debit card payments, paying via your bank or building society and paying via cheque, among others. See the full list of ways to pay over on the Self Assessment site.
Whichever method you choose, make sure you allow plenty of time for the funds to clear, as they need to be with HMRC by the deadline date for you to avoid late penalties.
As part of a new series looking at day jobs for creatives, we speak to the NZ guitarist about the merits of his side-career as a contract electrician
It can be really difficult to make a living from creative work alone. As I discussed previously with DJ/new music guru Shell Zenner, sometimes the only course is to work a day job and try to build things to a point where you can go full-time.
It is a balancing act, but done well, this approach can result in you doing more than one job you enjoy, while also easing some of the financial pressure and helping you gain some complementary skills.
Linz Hamilton (pictured top of the page, left) grew up in New Zealand and came to the UK to make his way in music. On arriving, one of the first shows he caught featured the band Vodun – a voodoo rock trio that meld big, Sabbath-y metal riffs with the powerful soul-style vocals of singer Chantal Brown (ex-Invasion, Chrome Hoof and Do Me Bad Things). As fate would have it, just few years later, he wound-up joining the group.
“It really works with the lifestyle of touring. If you’ve got a break, you can go and do a three month contract”
When he’s not occupying his role as a neon voodoo spirit, though, Linz covers his bills by working as a contract electrician. It’s a line he got into due to the foresight of his school career’s office.
“A friend of mine went to the career’s department and said, ‘I want to be a musician and play in bands’,” explains Linz. “They said to him, ‘Go and do electronics, because at least then if your gear breaks, you’ll be able to fix it.’ He went on to be a painter and I took his advice and trained to be an electrician!”
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Perhaps my views are outdated, but I can’t imagine a UK equivalent being so practically-minded. Either way, it appears to have been good advice.
“It’s been really handy for me to have a trade,” says Linz. “It’s meant that I could go, ‘OK, I’m going to uproot from New Zealand, get a job, be educated, do contracting.’ It really works with the lifestyle of touring. If you’ve got a break, you can go and do a three month contract, or jump on a site for a week or so.”
Music is one of the riskier career paths and Linz says the idea of finding a complementary day job had long factored in his thinking.
“I was endorsed by my neighbour in NZ who used to make handmade guitars for me and he said, ‘Never forget that you will need a job.’ It’s not the 70s anymore where the big labels will fund you the whole way. You’ve got to love it and want to love it and you’ll have to pay your way a little bit.”
Fanning the flames
As predicted by the Linz’s school career’s advisor, the career choice has had other benefits for his music, too. Not just in understanding signal path and tone.
“It really paid off at a show in Madrid,” adds Linz. “I had to stop and resolve an electrical fire so the support band could finish their set and we could play ours!”
“It’s not the 70s… You’ve got to love it and want to love it and you’ll have to pay your way a little bit”
The other benefit of becoming an electrician is that a lot of the training can be done via a paid apprenticeship position. However, if wires aren’t your thing, Linz has one other suggestion…
“As a little side note,” adds Linz. “Chan [vocals] would also recommend cheffing/kitchen work, as she has been working for a charity Made Up Kitchen over the lockdown/pandemic, cooking donated food into a different daily menu for those in need over this crisis. She is really enjoying the ability to still be creative and giving back to the community.”
For Linz’s part though, he says he’d happily recommend electrician work for touring musicians and he’s glad he took the tip given to his friend. As Linz jokes: “It has been the best advice I never got!”
If you want more information on apprenticeships, check out the City & Guilds website. To keep up-to-date with all things Vodun
Vodun (Linz Hamilton pictured left)
Short Cuts is Creative Money’s series of quick tips, tricks and thoughts about saving or making money in the creative industries.
How can we help you?
What issues are you facing? What questions do you have about managing your money in the creative industries? What would be most helpful to you?
We don’t have all the answers, but maybe we can find someone that does.
Never have enough money for the things you actually want? Try thinking about your happiness, instead…
Most of us think that we know how to spend money – it’s the one thing we don’t need help with. Yet adopting an approach where we question why we’re spending is the principle that will, over the long run, make the single biggest difference to both your happiness and financial health…
Many of us in the creative industries have to exist on slimmer financial margins than the average earner. We may well feel that we’re already diligent with our cash, but after the bills are paid, our ‘fun money’ runs out quickly.
There are things we can do to change this situation and increase our funds over the longer term (increasing income and reducing bills). However, why not start getting the best bang for your buck right now?
Finding a framework
To do this, it can be helpful to have a little bit of a mental framework for your spending decisions. There are three things that it’s helpful to bear in mind with any spending:
Is this going to make me happy?
Is that happiness going to last?
Is this the most affordable way to get this happiness?
To maximise your… err… ‘happiness return’, you need to be able to answer yes to all of the above and make the purchase without getting into debt. This allows us to think beyond just what we’re spending every month and to consider why we’re spending that cash.
Most of us are well aware that if you spend £2.60 a day on posh coffee it soon adds up. Buy one coffee five days a week for 50 weeks of the year and it equates to about £54.16 a month.
Asking why I was spending that cash helped me to find affordable alternatives
Lonely Smarter people will then factor in the return you could be earning on the cash elsewhere. So in this example, £54.16 per month (earning a typical 7% per year in a low-cost index fund investment) could become £9,370 over ten years. Not bad, as a trade-off for one coffee per week day.
But breaking that habit is easier said than done. We LOVE coffee. In our flawed human brains, it’s not simply a coffee, it’s a conversation with a friend, a place to go and work out of the house/office, an essential drug we require to function, or maybe we just really, really like good quality coffee.
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If coffee makes us happy and maybe even does so in a lasting way, then thinking about why we spend this money can help us find a more affordable alternative that may well deliver just as much happiness.
I just looked up my own coffee spending from 2018 (because I have a budgeting app) and I was averaging almost exactly the figures above – and often more like £70/month.
Asking why I was spending that cash helped at lot. I realised that A) I love good coffee; B) I dislike working at home all day every day and C) Going to hipster cafes makes me happy.
Yeah. My latte art needs some work… But it tastes good!
Now available: affordable happiness!
Instead, I spent a small amount of money on a coffee machine and a grinder (for a combined cost of about £70 at the time), ordered a kilo of good beans and learned, through trial and error, how to make good coffee at home.
Meanwhile, here in Liverpool, we have a swanky central library and a host of museums, galleries and other public-wifi-equipped spaces where I can work for free among other human faces. Then, about once a week or so in normal times I will duck into a cafe to support both the hipsters and my ego.
If I keep it up over 30 years (to retirement), that cash will very likely grow to a mind-boggling £66,000+
This alternative plan has cost me less than £20 a month over the first year and I still get a lot of coffee-based happiness, but now I’m also saving about £30-50 a month in the process.
I’m certainly not the first person to point this out, but I wanted to show you how I’d used this approach to make a palpable difference.
What’s more, that cash is now going towards a self-invested personal pension (SIPP), which gets topped up 20% by the government – in the form of income tax relief – before it even hits the fund itself, so should make well over that £9,370 over the next decade.
It doesn’t have to be coffee, of course. It could be smart phones, extra guitars, art materials, cameras, clothes… We all have our spending foibles and they can be really hard to spot day-to-day, especially if we associate them with our creative work (hello, musicians!)
Vicki Robin – who co-wrote one of the world’s best-selling personal finance books, Your Money Or Your Life – calls these impulsive spending blindspots, ‘gazingus pins’. I prefer the term ‘shiny things’, but the effect is the same – some blend of compulsion, misplaced aspiration and self-identity prevents us from noticing them.
We need to transform these decisions from ‘prohibition’ to ‘allocation’
However, if before you drop the cash, you can ask ‘why?’ and determine a potential purchase’s lasting impact on your happiness, then it’s much easier to notice the shiny things that aren’t worth the money.
We need to transform these decisions from ‘prohibition’ to ‘allocation’ – and that makes a lot more sense to our flawed, human brains. Ultimately, if we consistently and consciously spend less on the things that won’t make us happy and more on the things that do, we wind up in a much better place. Remember:
Is this going to make me happy?
Is that happiness going to last?
Is this the most affordable way to get this happiness?
The next time you find yourself hovering over a shiny thing and wondering whether it’s worth the cash, ask yourself the questions above. You’ll be surprised at the difference it can make.
What’s your shiny thing? And are there any hints, tips or coffee victories you can share? Let me know!
Our thoughts on the financial outcomes of life as creative workers often seem to fall into two categories: ‘the starving artist’ and ‘the sell-out’. If only it were that simple…
I would wager that everyone who earns money from creative work has wondered at some point whether or not they’re ‘selling-out’. The tropes at the heart of this struggle are are within us all: the starving artist has unimpeachable integrity but negligible income, while the sell-out picks their gigs by the paycheque. They remain locked in combat, fighting for our very souls.
We’ve all likely had cause at some point to embrace the starving artist and some of us even come to experience life at sell-out end of the scale – gaining a full understanding of the ambiguous privilege of considerable wealth and fame.
Straight line thinking – how people often think about income and integrity
Sometimes, we may also consider the evener rarer ‘third way’, wild success on our own terms – let’s call this ‘the rockstar’ – but this often seems even further removed from our view of the achievable (though Seth Godin’s The Icarus Deception argues the opposite).
At other points, we may feel we have no option but to leave an industry, or take some other work on in purely to pay some bills.
Anyone who’s even come near to experiencing true poverty knows that the starving artist cliché is a false romance
What’s interesting is the extremities of these viewpoints – that we seem to ascribe the myriad outcomes of our creative work as an ‘all or nothing’ endeavour. The truth of it, though, is that it is a spectrum – and that existing on that spectrum, rather than at one of two extreme poles, is not such a bad place to be.
Anyone who’s even come near to experiencing true poverty knows that the starving artist cliché is a false romance. It’s been perpetuated throughout history, often by patrons in positions of wealth, but while understanding or experiencing poverty and the broader human condition has no doubt informed great creative work, it is certainly not a route to happiness. In fact it is, by definition, a direct route to unhappiness.
What’s it worth?
At the other end of the scale, it is widely acknowledged that while wealth can help you ‘buy’ a certain level of happiness, the benefit of greater wealth tails-off dramatically once you’ve covered your basic needs and a few extra comforts. This is a phenomenon that US blogger Mr Money Mustache has popularised and termed the Marginal Utility of Money.
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Even Warren Buffett, the 89 year-old billionaire CEO of Berkshire Hathaway – and at one point the world’s richest person – counsels against the pursuit of wealth for its own sake. And this is a guy who bought his first shares aged 11.
“Doing reasonably well in this country really is pretty darn good,” he said, talking to US students in 1999. “Great wealth is the tiniest bit different, in a real sense, than having just a decent income. To trade a decent income and something you love doing… for huge wealth where you trade a lot of your principles would be a terrible mistake.”
So, if we agree that both extremes are flawed and stop trying to define our financial personalities against a minority of outliers, what does the right path actually look like? And what’s a reasonable income?
Great wealth is the tiniest bit different, in a real sense, than having just a decent income
Warren Buffett
That is yours to decide. For me, it’s enough to cover living expenses, to be able to pay for a few home comforts and holidays and to save enough to retire within the next 25 years (WHAT!?) At the more luxurious end, I’d like to spend as little time on compulsory work as possible. I like my work, but I value freedom even more.
Figuring out the numbers behind these goals is really useful to making sure you’re actually on course to meet them.
I discussed why tracking your spending is key to understanding your cash flow (and therefore getting some control over a variable income) last week, but there are other benefits to that process, too. When you know how much you spend, you know how much is enough. You know when you can stop, or say no.
As far as possible, I’d also like to get to these points above without doing work that I do not personally believe in.
“‘At the end of the day, you only have yourself to answer to.’ Regardless of having to pay your bills, keep to deadlines… if it ‘sits right’ – then that’s okay.’”
If you operate with integrity, then you avoid selling-out yourself, but only you can judge what that might look like.
The ‘starving artist’ trope comes from a belief system and, as with any belief system, there will always be a vocal minority of hardliners, who refuse to question the dogma out of some fear that the world will unravel. Instead, each of us needs to decide on our personal beliefs and principles around money and creativity – and make decisions accordingly.
There’s a broad, rich spectrum between ‘the starving artist’ and ‘the sell-out’
If you lean towards the starving artist axis then, contrary to the thinking of many, you’ll likely need to watch your expenses closely. What’s more, planning for the future and times of poor cash flow becomes even more essential.
If you lean the other way, gaining a higher income, then you may have more flexibility with your spending and insurance against the risks you take (some of which might pay-off handsomely). However, to gain true satisfaction from your work, you will likely still need some measure of your personal values built-in to it – lines you don’t cross. This might be to do with the ethics of the organisations you work with, the relative creative appeal of jobs etc. Knowing your values helps you to navigate the path.
The full spectrum – the options are much broader than many of us realise and the path you tread might change according to your priorities at the time
For instance, in my case, I am open to many different types of work. My main gig is music journalism, but I’ve written copy and advertorials, I’ve run events and managed projects, I’ve led degree courses and taught. But I’ve come to understand that if the only reason I want to take a job is the money – and I can find no other appealing features in terms of the work, my personal or career development, or the organisation I’m working with – then I am going to regret that decision.
Not everyone will feel that way – or feel they have the option to do so (particularly right now) – but that’s OK. Indeed, that’s the whole point. Creative Money is not here to promote the pursuit of untold riches, but simply to help you figure out how you can sustain yourself over the long term as a happy, creative person.
There’s a broad, rich spectrum between the tired clichés of the starving artist and the sell-out. Where do you want to be?
We talk useful financial/career resources for journalists, industry barriers and the difficulties of managing money as a freelancer
For this week’s How I Make It Work, Creative Money spoke to Lydia Wilkins. A freelance journalist, Wilkins [pictured above, right] has had bylines at a string of significant publications, including The Independent, The Metro and Readers Digest. Wilkins also writes her own blog, Mademoiselle Women (in which she documents life on the Autistic spectrum) and pens an excellent weekly newsletter. She is currently busy developing these into sources of income.
Like many of us, Wilkins is in the process of attempting to weave these various creative threads together in order to form a viable freelance career and support herself through her writing.
We spoke via email about the resources that have helped her figure it out thus far, what she’d change about the treatment of freelancers and how she goes about keeping track of her finances, despite her struggles with numbers.
How would you describe your current role?
“I’m a multi-hyphenate freelancer! I blog three times a week at mademoisellewomen.com. I contribute regular freelance articles to places like The Independent, Readers Digest, Refinery 29 and The Overtake – usually to do with travel, book, or autism. I’m also a webinar trainer for a small organisation that teaches strategies about Autism. I also run a weekly newsletter; this has interviews, a comic I’ve been able to commission, as well as resources for freelancers and Autistic individuals.”
“It’s insulting to ask me to do whatever for ‘exposure’. Exposure isn’t a tangible concept – it doesn’t pay my bills”
Do you ever do unpaid work? What are your thoughts on this?
“Very, very occasionally. Right now, the blog is not profitable – despite ‘breaking even’ last year – due to the pandemic. Sometimes smaller magazines that cannot afford to pay allow you to pursue a story you wouldn’t have been able to take up elsewhere. I recently interviewed Lissie for BN1 Magazine – everywhere I pitched had quite specific rejections, she did not ostensibly fit the ‘brand’, etc. I got to interview her down the phone – and it’s still one of my favourite interviews I’ve conducted.
“That being said, I don’t think it should be allowed. Freelancers are highly qualified individuals. They are just as valuable as staff reporters – you should be paying for the service you use. I sometimes feel like freelance contracts have just been used to pay less, to still create a quality product – but we need time and resources… it’s insulting to ask me to do whatever for “exposure”. Exposure isn’t a tangible concept – it doesn’t pay my bills – so why would I agree to that?”
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What decisions or experiences have proved most valuable in helping you to establish yourself within the industry?
“Firstly, I have been invited to events that Hacked Off have held. While the issue of press regulation is still controversial, it was utterly harrowing to hear the stories of people who’d been harassed, placed under surveillance, etc. Journalism has a responsibility; we are the gate-keepers, but we cannot behave in such a way to people, regardless of fame or fortune. I have this at the forefront of my mind most days – and it informs the way I talk to sources.
“Secondly, ‘If you don’t ask, you don’t get’ is a phrase I grew up with. Derren Brown wrote of changing our stories, the stories we tell ourselves [essentially, making the choice to reframe the way we view ourselves and our limitations] – and doing that can work really well.”
What have you found to be the best resources in terms of figuring out how to earn money and sustain yourself as a journalist?
“Journo Resources was the first website I came across, while studying, that I thought ‘they get it’. As an Autistic individual, I have often had to battle to be heard – and not just be taken as someone who ‘suffers’. (Yep, this has been said to me on several occasions – and is a disgusting trope. It also can prevent me doing the job I do.) There is a wealth of resources, and I learnt a lot more than I thought I would – with CVs, how to invoice, and more.
“The Bloglancer is run by journalist Jenna Farmer. It’s a blog about how to make money blogging, as well as freelance journalism. Here was someone experiencing the same I was – who was maybe just that little bit older, and a little bit wiser! The posts are accessible, cover a slew of issues, and I have gotten some work from the fortnightly jobs board.
“PressPad is an organisation that is devoted to #DiversifyTheMedia. I wish they’d been around when I was starting to get interested in journalism! The pandemic means they’re running a great outreach programme – with masterclasses, CV clinics, and more.”
Lydia Wilkins (right)
Have you had any good financial role models?
“Not really, no…”
How do you attempt to deal with the inevitable ups and downs in cash flow that come with freelancing?
“I must admit, I am not really sure how to answer this one…”
Do you find that you have to keep a close eye on your finances? What tools and resources help you to do so?
“Yes. My support worker has suggested I may have a condition that affects my ability to interpret numbers – it’s something I really struggle with. I use a form of journaling, month by month, to keep a track of my finances – such as with ongoing invoices, and keeping a visual record of my financial history. Bullet journaling can help.”
Are you saving for retirement? Is this something you feel is feasible?
“Not just yet! I am looking to get into full-time employment. Though I am a trained reporter – and have interviewed people like Anastacia, Sir Harold Evans, Jodi Picoult – I have often found myself on the end of discrimination. I am slowly transitioning; then I will save for retirement.”
“I use a form of journaling, month by month, to keep track of my finances”
Is there anything that bugs you about the way the industry operates, particularly in terms of finances or money management, that you would like to change for the better?
“What bothers me is the way freelancers are treated. You are supposed to be paid within 30 days – and late payments can apply. This is the law, yet so many publications willingly flout this! Apparently, it takes 45 days to get set up on one finance system, I was told for one publication. And I think I also had to follow up that payment… Freelancers are becoming more and more used, across more and more industries. It’s about time they were treated fairly – with pay that’s in line with a staff job, equal across all characteristics – and not just as an afterthought.”
Have you noticed any issues relating to finance that might prove a barrier to diversity in the industry? And do you have any ideas for improving the situation?
“I’m not sure I have any practical solutions. It’s a really good question to be asking, but it is not always to do with hiring, but more about [what we can do] at an educational level. For journalism, if your parents are university educated and were reporters – plus, being male and white with your own degree – it gives you a hell of an advantage… I wouldn’t know what to say to that – but I wrote about it here.”
What’s the most valuable advice you can offer to someone starting out in the industry?
“One of my mentors worked for Reuters, and is sometimes looked-up to as a kind of ethics authority. I asked for him, and I remember the most valuable piece of advice he gave me: ‘at the end of the day, you only have yourself to answer to.’ Regardless of having to pay your bills, keep to deadlines, as long as you are okay with what you’re doing – if it ‘sits right’ – then that’s okay.’”
The summary:
If you’re going to write for free, write for yourself. The much-vaunted ‘exposure’ offered by non-paying platforms is rarely worth it. Spend the time building your own audience.
Change the stories you tell yourself. Do you avoid pitching opportunities for fear of rejection? This can be a self-perpetuating cycle: fearing failure means we don’t try, which results in guaranteed failure. Instead, try telling yourself ‘I need to give it a go to find out if this works…’
Find resources that demystify your industry. There are some excellent resources emerging for the world of freelance journalism and writing. Check out Journo Resources, Press Pad and The Bloglancer.
Try bullet journaling to get a visual representation of what’s happening with your finances, month-to-month. If you struggle with numbers, bullet journaling can give you a more ‘hands-on’ sense of your cash flow. Here are some ideas on that.
Journalism is still dominated by white males with degrees. Diversifying access to education and training is key to addressing this imbalance.
How I Make It Work is a series of interviews with a variety of creative professionals, where we discuss personal experiences and lessons learned about money in the creative industries.
Are you self-employed, freelance, or a contractor with a variable income? Here’s how to cope with the financial peaks and troughs
Nearly half of creative workers (47%) are freelance or self-employed (source: ONS, 2017). Chief among those are writers, producers, artists and directors – it’s a large and significant part of almost all creative industries. One of the key challenges for this group is managing money on an irregular or variable income. So what can we do to smooth-out the financial ups and downs that we will inevitably face in a given year?
The key is learning to syphon-off your income in normal and higher-earning months into a ‘top-up fund’, so you can top things up from your savings when needed.
This would be easy if humans were calm, logical creatures, but we’re not – so we need a way to tell whether or not we should save or withdraw (and by how much) in a given month.
Turning a problem into a question
If we put a little effort in upfront, we can save ourselves from guesswork down the line.
In order to do this, we’re going to answer these five questions…
Why? Well, if you know how much you earn and how much you spend in a given month, you can figure out what you are left with. This is your personal cash flow.
All businesses ultimately survive or perish based on their cash flow (overall, is there more money flowing in than flowing out?) and it’s the same in your personal finances.
Once you have a predicted cash flow figure for the month, you know whether you will likely need to pay in or out from your savings (your ‘top-up fund’) for that period. This will help smooth-out that variable income over the longer term.
Answering the final question (‘How much do I need?’), gives you the comfort of knowing the minimum amount you’ll need to live on in a given month. The bigger the gap you can create between your income and this essential spending, the more you can potentially save into your top-up fund – and the bigger cushion you’ll have to smooth-out the financial ups and downs.
This is quite a lot of information to pull together initially, so I’ve put together a spreadsheet to help you keep track and – if it all goes to plan – to do some of the calculations for you.
Free spreadsheet!
The sheet is designed to be used to log your answers to some of these questions and calculate your cash flow for a typical month.
You can then stop there, or you can use it to keep track over the longer term. Keep it up-to-date and the sheet will help you figure out how to spread your variable income more evenly throughout the year. We do this using a ‘top-up fund’.
You can download the sheet above and there are links and tips (in bold, with the lightbulb icon) throughout this piece to help you understand where to enter the relevant information.
Even with the whizzy spreadsheet above, this stuff can take time, so don’t stress if you find you have to do it in instalments. The clarity is worth the effort.
1. How much do I earn?
First, let’s figure out what you have coming in normally.
If you have any salaried work (or state benefit) that pays a regular, fixed amount, use your bank statements or pay cheque to find out your monthly income.
Make a note, or add this into the top ‘Salary income’ box for your ‘Typical Month’ on the supplied spreadsheet.
But I’m freelance and my income is a nightmare…
It’s a bit messy, but finding a past average is probably the simplest and most helpful place to start. We’re looking to smooth-out future dips and bumps in income, so a figure that represents the middle of your ‘normal’ range is useful here.
Ideally, you want to represent a long period with the average – a year or more – but you can hone this and update down-the-line. Right now, settle for making a start.
So… add up your income for your chosen period and divide the figure by the amount of months it covers.
Total income for period ÷ Number of months in period = Average monthly income
For instance, if you earned £12,000 in freelance income over 12 months, your average would be £1,000 a month.
Some ideas about where to find this information:
Banking apps (you may be able to just filter income only transactions)
Your income statement (where you track invoices etc.)
Your tax returns (dig out that Self Assessment login)
Ask your accountant
If you’re setup as a company, make sure you factor in your dividend income for the year here, too.
Once you’ve found it, make a note.
You can drop your average freelance income figure in the ‘Freelance income’ box of your ‘Typical Month’ on the spreadsheet. This will then be added to any salaried income or benefits you specified, in order to tell you your average total income.
Then take a break…
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Now let’s figure out your spending for a typical month.
Sit down with your banking app or statements and go through your spending for the last month (or one you feel is truly representative of your typical expenses – if in doubt, be pessimistic).
Split the month’s spending into categories of fixed and variable expenses.
Fixed expenses
Your fixed expenses will be recurring bills and spending (e.g. rent or mortgage, insurance, gas/electric and other direct debits), which do not usually vary month-to-month.
Variable expenses are things that may might vary month-to-month, for instance: travel costs, food shopping, eating out, or gifts and entertainment.
It’s a good idea to make groups under your variable expenses to reflect your spending priorities and help you to see where your money is going. There are some examples on the sheet above already. Keep it simple, though – no more than 10 groups.
If you just can’t face doing all of this immediately, settle for totting up any expenses not covered in your fixed category and lump them all in one ‘other expenses’ group.
(This sort of thing makes accountants reach for the smelling salts, but you can always come back and split this out out at a later date.)
Yes! Or at least, sort of… There are several apps out there that will help to automate the process of grouping expenses. Some of the fancier bank apps do this and there’s also the likes of MoneyHub and Money Dashboard, which allow you to connect and monitor multiple accounts/banks.
You can set your own groups or categories for expenses, but you will have to check-in and tag/correct your transactions. However, it does ‘gameify’ it somewhat, so if you’re a phone addict, it could work for you.
Adding it up
Now add the total of your fixed expenses and variable expenses together. Hello, monthly spending!
3. How much am I normally left with (i.e. what’s my typical cash flow)?
If you’ve been using the sheet, just scroll down and look at the ‘cash flow for the month’ total to see what’s left in a typical month.
If you don’t want to use the sheet, you’re simply doing the following calculation for your example month:
Total income for month – total spending for month = cash flow for month
What does this mean?
If you have a positive number, this is an amount you can save to supplement leaner months, using a ‘top-up fund’.
Bear in mind, too, that this ‘Typical Month’ cash flow figure might look small, but you are using an averaged income at this point, so even a small surplus is a good thing. It suggests an overall trend of more cash flowing in than flowing out.
If you get a negative number at this point, it means that on average you are likely spending more than you earn (a negative cash flow), or are on course to do so in the near future.
Don’t panic – this is good information to have, but you will need to cut expenses or raise your income to sustain yourself over the longer term. Figuring out your essential expenses (Q5. ‘How much do I need?’) will help here.
4. How can I create a more consistent income?
The answer is to create your own overdraft, using a ‘top-up fund’.
As soon as you are earning more than you spend, set-up an easy-access savings account to set this remaining cash aside. This is your ‘top-up fund’. So how do we do use it?
One method is to simply use your average income (as logged under your ‘Typical Month’) as a guide, as follows:
Earn more than your average income?
Pay the difference into the top-up fund.
Earn less than your average income?
Withdraw the difference from your top-up fund.
Of course expenses vary as much as income and most of us will need to keep a closer eye on things.
If you want to keep a better track on your finances and expenses, update the sheet monthly with your income and predicted spending and it will tell you whether to save or withdraw the ‘cash flow for the month’ figure.
* Updating requires much less effort than finding the initial figures, particularly if you set up your expense groups using an app – you’ve done the hard work already.
My mind won’t let me do this. It needs shiny things.
I hear you. Some things that might help you:
Make the ‘top-up fund’ deposit/withdrawal early – as soon as you can once payments have cleared.
Keep your ‘top-up fund’ with a different bank. You still want easy access, but for some reason the mental difference of having to login to a different platform can make you less inclined to dip-in to those savings.
Use separate accounts for bills (fixed expenses) and variable spending. Direct your earnings to a bills account and then transfer a regular amount (your variable expense total) over to your spending account and spend according to your priorities that month, knowing your bills are covered. Once you run out of cash in your spending account, that’s your lot for the month.
Don’t think of your ‘top-up fund’ as spare money. It is essentially your future income. ‘Borrowing’ too much from it now is like a salaried worker asking for an advance.
5. How much do I need?
Need to create a bigger gap between your earnings and spending? First, find out your essential expenses…
Look over your spreadsheet/notes/crumpled napkin with your expense totals and consider which items could be cancelled or easily and quickly reduced, if necessary.
For instance, rent is still considered compulsory by most landlords, but you may be able to avoid the posh shops for a bit and spend less on food.
Add it all up. Now you know your essential spending – the bare minimum amount you could exist on from either your income, or savings.
Are you asking me to remove all joy from my life?
No, but this figure is really useful to bear in mind for a number of reasons, for instance…
If you’re making an effort to boost your ‘top-up fund’ or other savings (because income – essential expenses = your maximum current saving rate).
If you want a minimum earnings goal, particularly if you are risk averse and keen to always avoid spending more than you earn (creating negative cash flow) within a month.
If you’re assessing whether or not you can afford to pass on that boring work you’ve been offered, or start that new thing.
Keeping one eye on your cash flow is key to avoiding nasty surprises. If you keep the sheet up-to-date, it can help you do this.
It has columns for ‘Year Total’ and ‘Year Average’, too, which can be really helpful in showing whether your overall cash flow is positive or negative for the year, as well as your average income etc. The year average can then me imported to the next year to form the basis of your ‘typical month’ column and the cycle starts over.
As you get more confident, it’s a good idea to start to increase your top-up fund savings (by cutting costs, or boosting income) until you have at least a month’s ‘salary’ on-hand.
A final note…
This approach should be regarded as a useful rule-of-thumb. It is a collection of various techniques that have worked for me, but it is not 100% foolproof.
For instance, it initially relies on your past income and predicted spending trends prevailing to keep your top-up fund savings balanced, which (particularly in the current climate) will not always prove to be the case.
In addition, the more dramatically your income fluctuates (say, you have three or four ‘big’ paydays, which sustain you through the year), the more you will need to set aside before you start using this technique regularly. In this case, build the ‘top-up fund’ as much as you can for time being and implement the system following your next big payday.
Nonetheless, the above represents my best effort to date. As we gather more ideas and resources on Creative Money, I will endeavour to update this guide and the spreadsheet.
Ultimately, the minimum you’ll get out of it is a better knowledge of your earnings, spending and the importance of cash flow, all of which can be really useful. Give it a go and let me know how you get on!
